Valuation shortfall Construction Loan

alissa · Mar 12, 2019 8:00 am

My broker ordered valuation for my construction of house in Caddens with EBH and valuation came back $120k short! A bit upsetting for us as we cannot cover the difference. Should we ask our broker to get another lender’s valuation? Should we approach another broker?

becjarrettdalton · Mar 12, 2019 12:15 pm

Hi Alissa, I can understand your disappointment and concern. Have you had a look at the valuation? Have you compared it to other sales of 'like' houses in the area? That is, houses with the same number of bedrooms / bathrooms and land size that have sold in the last 3 months?

Do you know if the build component or the land component came up short? Or both?

Your broker should be able to help you - no need to jump ship yet! Start with looking at these elements and you'll get an idea if the valuation is wrong or not.

alissa · Mar 12, 2019 12:34 pm

Hi there. Thanks for your response. I’ve asked my broker if we can grab a copy of the report but he said he had already challenged the valuation but ANZ was firm with the valuation. Pretty challenging where I am building as it is a new estate and there is not much sales history. Plus, the surrounding suburbs are not comparable (Kingswood, St Marys, Orchard Hills) as they are old suburbs. Another thing is the upgrades which we spent around $70k on - ANZ is saying they are worthless and doesnt add to final selling value when built. I have a feeling their valuation is using the wrong variables.

Now our broker is going to another bank to get a different valuation hopefully it comes out fine.

becjarrettdalton · Mar 12, 2019 12:47 pm

Yep - wasn't thinking to challenge the valuation so much as to work out if you think it's accurate. I know the area, and I know what you mean but there are comparable to be found in new homes in Caddens and Claremont meadows that have been sold recently. Yes, some upgrades don't get full value attributed - you had a lovely kitchen, having an incredible kitchen doesn't make it that much more valuable in terms of a 30 day sale value from a lenders perspective. Good luck with the new valuation! I have just done one in Caddens stage 6 - but a fairly basic home - and it came in spot on so there is some comfort.

alissa · Mar 12, 2019 12:52 pm

Thanks for that! Sigh, worst case we have to revisit the upgrades and remove some of them. Have to pay admin fee to change them but we really cant afford to pay them in cash. All the while our broker had given us a go ahead signal so this under valuation really came as a surprise.

alissa · Mar 14, 2019 8:23 am

So we got the valuation report. Looks like they compared our 2 storey house to 5-6yrs old single storey houses. There is not much comparable house to us that was sold recently

Also structural changes that are definitely value adding are not considered in the valuation.

Our broker is going to another lender.
At the same time we approached another broker to see what he can do for us.

becjarrettdalton · Mar 14, 2019 10:39 am

Be careful of multiple applications at once, fingers crossed on new valuation.

alissa · Mar 14, 2019 10:47 am

Thanks @becjarettdalton i think theyre just doing valuations and not lodging applications so it shouldnt hurt our credit file?

becjarrettdalton · Mar 14, 2019 10:48 am

Correct

alissa · Mar 14, 2019 10:53 am

Thanks @becjarettdalton i need all this kind of relief at the moment

akashjohn2006 · Apr 09, 2019 4:31 pm

Hi Alissa,

I am going through a similar situation at the moment. My valuation came short by 70 thousand. Did getting valuation from another bank helped ? Or did other banks also came to a similar value for valuation?

Any update on this would be greatly appreciated.

Hope you could sort out your issue smoothly.

Thanks

John

alissa · Apr 09, 2019 4:45 pm

You may try to challenge but very unlikely to change. We went to 2 other lenders and they both got much higher valuation. Make sure you submit all docs, variations, upgrades, specs etc. and maybe highlight some facts that the first valuer may have missed.

akashjohn2006 · Apr 09, 2019 5:54 pm

Thanks for your reply alissa.
How much difference was there from the first valuation and the subsequent higher ones?

alissa · Apr 09, 2019 5:58 pm

akashjohn2006

Thanks for your reply alissa.
How much difference was there from the first valuation and the subsequent higher ones?

$70 and $80k higher!

akashjohn2006 · Apr 09, 2019 6:03 pm

alissa

akashjohn2006

Thanks for your reply alissa.
How much difference was there from the first valuation and the subsequent higher ones?

$70 and $80k higher!

Thats pretty good. Good luck with your build.
Cheers

raptor19 · Jun 12, 2019 5:41 pm

Hi, im in a situation on applying for house construction loan and the bank valued my land 20k lower than the purchase price compared to the valuation amount 3 months ago which is the same as purchase price. Since the bank used a different valuer which i guess the reason why the report came back differently.

My question is since i am currently under mortgage with this bank, can i get another lender to finance my construction and having the same valuation for the land since i cant shell out 20k to cover the shortfall? Fyi, that i only put 10% deposit on land and planning to do the same for construction.

Thanks in advance

Rex

akashjohn2006 · Jun 12, 2019 6:35 pm

raptor19

Hi, im in a situation on applying for house construction loan and the bank valued my land 20k lower than the purchase price compared to the valuation amount 3 months ago which is the same as purchase price. Since the bank used a different valuer which i guess the reason why the report came back differently.

My question is since i am currently under mortgage with this bank, can i get another lender to finance my construction and having the same valuation for the land since i cant shell out 20k to cover the shortfall? Fyi, that i only put 10% deposit on land and planning to do the same for construction.

Thanks in advance

Rex

Hi rex,

Get valuation done from multiple banks to see which bank value your property more. There is no rule that you need to go through the same bank for construction. Please note that getting multiple valuation for your home would only help if the valuers are different.
I got the same valuation from NAB n CBA because the valuer was the same for both those banks.

Goodluck

John

becjarrettdalton · Jun 12, 2019 9:19 pm

raptor19

Hi, im in a situation on applying for house construction loan and the bank valued my land 20k lower than the purchase price compared to the valuation amount 3 months ago which is the same as purchase price. Since the bank used a different valuer which i guess the reason why the report came back differently.

My question is since i am currently under mortgage with this bank, can i get another lender to finance my construction and having the same valuation for the land since i cant shell out 20k to cover the shortfall? Fyi, that i only put 10% deposit on land and planning to do the same for construction.

Thanks in advance

Rex

Rex, you can but be mindful the bank has the final word and the valuers don’t like being challenged. And ultimately the banks won’t use a valuation from a valuer who isn’t on their panel - and if you have to change banks you’ll pay mortgage insurance again.

Valuations are based on comparable settled sales in the last 3 months of like properties (similar land size, same number of bedrooms, bathrooms, garages etc) in your suburb. If other settled sales match the value then you may be stuck.

What I would recommend is challenging the valuation with your current lender first by gathering comparable sales of like properties - even recent land sales if you settled on the land recently & see if they support the higher value.

Failing this you can try other bank valuers and do the same.

And worst case switch banks with New LMI

raptor19 · Jun 12, 2019 9:51 pm

akashjohn2006

raptor19

Hi, im in a situation on applying for house construction loan and the bank valued my land 20k lower than the purchase price compared to the valuation amount 3 months ago which is the same as purchase price. Since the bank used a different valuer which i guess the reason why the report came back differently.

My question is since i am currently under mortgage with this bank, can i get another lender to finance my construction and having the same valuation for the land since i cant shell out 20k to cover the shortfall? Fyi, that i only put 10% deposit on land and planning to do the same for construction.

Thanks in advance

Rex

Hi rex,

Get valuation done from multiple banks to see which bank value your property more. There is no rule that you need to go through the same bank for construction. Please note that getting multiple valuation for your home would only help if the valuers are different.
I got the same valuation from NAB n CBA because the valuer was the same for both those banks.

Goodluck

John

Thanks John for the feedback

raptor19 · Jun 12, 2019 9:55 pm

becjarrettdalton

raptor19

Hi, im in a situation on applying for house construction loan and the bank valued my land 20k lower than the purchase price compared to the valuation amount 3 months ago which is the same as purchase price. Since the bank used a different valuer which i guess the reason why the report came back differently.

My question is since i am currently under mortgage with this bank, can i get another lender to finance my construction and having the same valuation for the land since i cant shell out 20k to cover the shortfall? Fyi, that i only put 10% deposit on land and planning to do the same for construction.

Thanks in advance

Rex

Rex, you can but be mindful the bank has the final word and the valuers don’t like being challenged. And ultimately the banks won’t use a valuation from a valuer who isn’t on their panel - and if you have to change banks you’ll pay mortgage insurance again.

Valuations are based on comparable settled sales in the last 3 months of like properties (similar land size, same number of bedrooms, bathrooms, garages etc) in your suburb. If other settled sales match the value then you may be stuck.

What I would recommend is challenging the valuation with your current lender first by gathering comparable sales of like properties - even recent land sales if you settled on the land recently & see if they support the higher value.

Failing this you can try other bank valuers and do the same.

And worst case switch banks with New LMI :([

/

Thanks becjarrettdalton...I am thinking of lmi if i need to mind that if i switch lenders since i only pay 10% of total...ill check with any recent sales in my area for comparable sales